FIREWORKS are expected at listed sugar producing firm Hippo Valley Estates’ annual general meeting (AGM) today where the firm’s minority shareholders will question certain financial decisions by the majority shareholder, which allegedly prejudiced them over a long period.
Sources said minority shareholders, including Old Mutual and State pensions entity, National Social Security Authority (NSSA), will demand explanations over some dodgy decisions by Tongaat Hulett, which they claim amount to asset stripping and cost minorities dearly.
Through the alleged questionable financial decisions, the South African sugar producing, milling and refining giant, the largest shareholder in Hippo with 50,3 percent stake held through Triangle Limited, allegedly siphoned millions of US dollars from the company while declaring dividends.
According to evidence from confidential documents, Tongaat used its swaying influence as majority shareholder to repatriate dividends under the guise of direct procurement, prejudicing Hippo of US$10 million, but in the end the Zimbabwean unit received nothing.
“The anomalies were then discovered by the Zimbabwe Revenue Authority (Zimra), which garnished the firm’s bank accounts in 2017 to recover principal tax liability amount of about US$14 million, which however rose to US$17 million including interests,” a highly placed source said.
While the South African sugar firm was allegedly milking the Chiredzi-based sugar producing and milling firm, the Zimbabwe unit could not declare dividends for more than 15 years until 2018.
NSSA and Old Mutual have reportedly raised reservations in the past over the alleged financial impropriety allegedly perpetrated by Tongaat Hulett against Hippo Valley, but to no avail.
Further, the minorities will claim that Tongaat made spurious claims of accounting errors at Hippo, following similar irregularities unearthed by a forensic audit at group level in South Africa, to asset strip the local operations in order to subsidise yawning financial deficiencies at the group and appease South Africa shareholders.
Tongaat is listed on the Johannesburg Stock Exchange (JSE). Some of the irregularities the minorities will raise at the AGM today were reportedly also highlighted or captured in the findings of the forensic audit by PwC, which implicated several group and subsidiary executives.
Company sources said Tongaat is milking Hippo Valley to cover its debt positions with South African banks after it emerged that the sugar producing company, with footprints across the region, had huge obligations with banks and holes on its books amounting to between R3,5 billion and R4,5 billion.
Minorities will raise further concerns by pointing out that the JSE listed company wants to use technicalities disguised as adjustments to December 2019 financial accounts, after irregularities raised by Price Waterhouse Coopers in a forensic audit at group level, which allegedly extended to Hippo Valley.
The alleged irregularities delayed the publication of the group’s results and led to suspension of trading in Hippo Valley’s shares on ZSE, which was only lifted recently.
Among the other litany of issues minorities will raise tomorrow are irregular decisions that allegedly seemed to favour Tongaat such as imposition of an insurance broker for Hippo by its South Africa chairman and charging of two percent gross revenue as technical fees for services not rendered.
Further, the minorities will also question corporate governance deficiencies that include attempts by Tongaat to sell assets (a game park operated by the firm but leased by Government) in 2017, which was only stymied by authorities, as well as irregularities in the composition of the board.
Additionally, the corporate governance issues also relate to the appointment by Tongaat of non-executive Hippo board directors who ordinarily should be independent as required by Zimbabwe Stock Exchange listing rule.
Instead, most of Hippo’s non-executive directors were seconded from the group’s South African operations.